When negotiating a class action settlement, lawyers on both sides may need to consider whether subgroups within the class need to be separately represented by different counsel. The First Circuit recently reached that conclusion in Murray v. Grocery Delivery E-Services USA Inc., 2022 WL 17729630 (1st Cir. Dec. 16, 2022).

Murray involved three different types of claims under the Telephone Consumer Protection Act that, at first blush, seem similar. They alleged: (1) improper phone calls to class members using an auto-dialer; (2) calling people who were on the national do-not-call registry; or (3) calling people who were on the defendant’s internal do-not-call list. The settlement proposed that all class members would receive equal payments, regardless of which category they fell in. Examining the claims in detail, the First Circuit found that the three different categories of claims involved different elements of proof and different defenses. The auto-dialer claim became relatively worthless following a recent Supreme Court decision issued after the negotiations. The First Circuit concluded that it was procedurally unfair for settlement negotiations to be conducted by one set of plaintiffs’ counsel representing the entire class, rather than having each subgroup separately represented. While “[a]rms-length negotiations might assess the differences in claim value as too insignificant to warrant the delay, expenses, and risk of foregoing a global settlement,” the First Circuit concluded that a district court should not evaluate a proposed settlement until such “arms-length” negotiations with separate counsel had occurred.

The First Circuit also agreed with the consensus of most other circuits that have approved named plaintiff incentive awards. It rejected an Eleventh Circuit decision (see my blog post) holding that two 19th century Supreme Court decisions (prior to the advent of modern class actions) prohibited such awards. The First Circuit reasoned that such awards must be fair and reasonable, that named plaintiffs must “bear the brunt of litigation,” and that “incentive payments remove an impediment to bringing meritorious class actions and fit snugly into the requirement of Rule 23(e)(2)(D) that the settlement ‘treats class members equitably relative to each other.’”